Thursday, August 26, 2010

Cash for Clunkers, Expensive used cars

Washington had an idea to help stimulate the economy: Cash for Clunkers. The Federal government spent $3 billion of tax payer money to destroy billions of dollars worth of used cars. You could bring in your "clunker" for "cash" toward the purchase of a new more fuel efficient car. Traded-in cars were mandated for destruction. The law of supply and demand was replaced by central economic planning...
The result: The cost of a used car has shot up an average of $1,800 since Cash for Clunkers ended, a jump of 10.3%. Some models have increased even more, a Dodge Grand Caravan has increased by 34% since last year. Thanks to environmental friendly government intervention, supply was altered but demand never changed and now used cars cost more. The government spent $3 billion of borrowed money to make used cars more expensive. Cash for Clunkers did not create wealth it destroyed cars.